Supreme Court Case Could Impact Dealers

The advent of economic nexus rules is a game changer for dealers who conduct business with customers from other states. Economic nexus is a growing trend among states in search of revenue and its impact on dealers is potentially severe. Dealers could be liable for the collection of sales tax and the payment of income taxes to states in which they have no physical presence.

The U.S. Supreme Court has agreed to hear a case challenging the validity of these new economic nexus rules (South Dakota v. Wayfair).

On Friday, January 12, 2018, the U.S. Supreme Court agreed to hear a significant case involving a South Dakota law that requires an out-of-state seller to collect sales tax from South Dakota customers if the seller's gross revenue from taxable sales delivered in South Dakota exceeds $100,000, or if the seller makes more than 200 deliveries of these sales in South Dakota annually.

In September 2017, the South Dakota Supreme Court ruled that the statute violates the "physical presence" requirement articulated in a 1992 landmark case (Quill Corp., v. North Dakota). The fate of Quill's physical presence rule could be decided as early as this summer.

We will keep you informed as this case develops. Please contact Rex Collins of the HBK Dealership Industry Group if you have an comments, questions or concerns on this or any Dealership matter at at 317.504.7900 or rcollins@hbkcpa.com.

About the Author(s)

Rex is a Principal of HBK CPAs & Consultants and directs the firm’s Dealership Group. He has worked extensively in the dealership industry since 1984 as a department manager, a general manager and an owner, as well as providing tax, accounting and operational consulting services exclusively to dealers as an independent CPA.

This experience includes working closely with hundreds of dealers from coast-to-coast since 1987 on creative tax planning and financial statements issues. He provides clients with a wide range of transaction work services, and consults for them in specialty areas such as operations, government regulatory compliance, valuations and M&A feasibility studies.

Rex is active in many professional associations. He is the current Chairman of the BDO Dealership Industry Group, contributes articles and commentary to dealership industry publications, is frequently called upon to speak to industry associations and conferences, provides expert testimony, and is regularly quoted by industry and the general media.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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